Banking in the current economy can be
scary. But the passage of the
Emergency Economic Stabilization
Act in October provided some relief to businesses and consumers worried about their
bank accounts. This act increased the
amount for Federal Deposit Insurance Corp.
insurance in certain types of bank accounts.
“The modifications enacted in 2008 were a
result of the economic crisis that involved
subprime mortgages and mortgage-backed
securities issues,” says Terri L. Crane, vice
president of corporate treasury management at Fifth Third Bank. “These recent
changes and improvements should help
continue the confidence of both the consumer and financial communities.”
Smart Business spoke with Crane about
what changes were made to FDIC insurance, the benefits of these changes and how
the Certificate of Deposit Account Registry
Service plays a role with FDIC insurance.
What changes were made to FDIC insurance,
and why were they made?
accounts, either personal or business, that
do not earn interest are insured in full,
regardless of the balance. Those accounts
that are interest bearing are still covered
under the standard and new regulations for
bank accounts. Should you have one or
more typical checking accounts that earn
no interest, you are now insured for all
funds, regardless of the size of your balance.
insured up to $250,000, instead of the usual
$100,000. This increase is a major positive
development, both from a psychological
and financial perspective. It shows that the
federal government has a strong belief and
commitment in the U.S. banking system,
even in a period of economic crisis.
How long will these changes last?
These changes are not permanent. They
apply to all insured banking institutions
until Dec. 31. After that date, insurance limits will revert to their former levels. Your
regular accounts will again be insured up to
$100,000 and retirement accounts will be
insured up to $250,000.
On Jan. 1, 2010, the standard coverage limit
will return to $100,000 for all deposit categories except IRAs and certain retirement
accounts, which will continue to be insured
up to $250,000 per owner.
The issue surrounding the increased FDIC
coverage that has yet to be resolved is how
the financial organizations will pass along
increased insurance premiums imposed
upon them to depository customers at large.
What are the benefits of these changes?
This action will provide the FDIC with
flexibility to provide a 100 percent guarantee for newly issued senior unsecured debt
and noninterest bearing transaction deposit
accounts at FDIC insured institutions.
Along with the benefits of higher insurance limits, the commitment of the federal
government and the FDIC should instill consumer confidence in the continuing stability
of U.S. banks.
What is CDARS?
CDARS is an alternative way to enjoy full
FDIC insurance on deposits of up to $50 million. With CDARS, you sign one agreement
with a participating local bank or other
financial institution of your choice. They in
turn place CDs at other institutions up to
FDIC maximums but maintain that for you
by earning one interest rate and receiving
one regular statement. CDARS is a great
solution for depositors like nonprofits, public funds and businesses; advisers, including
trustees, certified public accountants, financial planners and lawyers; and individuals as
well as motivated investors.
How can CDARS be useful to businesses?
protection on CD investments.
CDARS network member to secure large
deposits, from $10,000 to $50 million.
CD investments placed through CDARS.
With CDARS, there is no need to negotiate
multiple rates or manually tally disbursements for each CD.
statement detailing your CD investments.
You no longer need to consolidate statements at the end of each month, quarter or
fees of any kind. You will not be charged
annual subscription or transaction fees for
using the CDARS service. The rate you see
is the rate you get.
deposits are eligible for full FDIC protection, you may not need to collateralize your
deposits. This eliminates the time-consuming task of tracking collateral values.
select from various maturities — ranging
from four weeks to five years (260 weeks) and choose the terms that best suit your
can support lending initiatives, including
special development projects that strengthen the local community.
TERRI L. CRANE is vice president of corporate treasury management at Fifth Third Bank. Reach her at (513) 534-0677 or